IMF: Risk of Collapse of Euro and “Full Blown Panic in Financial Markets”
The Eurozone could break up and trigger a “full-blown panic in financial markets and depositor flight” and a global economic slump to rival the Great Depression, the IMF warned yesterday.

In its World Economic Outlook report, the International Monetary Fund said the collapse of the crisis-torn single currency could not be ruled out.

It warned that a disorderly exit of one member country would have untold knock-on effects.

“The potential consequences of a disorderly default and exit by a euro area member are unpredictable… If such an event occurs, it is possible that other euro area economies perceived to have similar risk characteristics would come under severe pressure as well, with full-blown panic in financial markets and depositor flight from several banking systems,” said the report.

“Under these circumstances, a break-up of the euro area could not be ruled out.”

“This could cause major political shocks that could aggravate economic stress to levels well above those after the Lehman collapse,” said the report.